Draper Fisher gives it the college try

The last time young entrepreneurs were entrusted with massive amounts of venture capital, the US economy experienced a bubble. But maybe a fresh crop of college students today can do a better job. Last week, Silicon Valley veteran Draper Fisher Jurvetson announced it would be holding the first ever DFJ Venture Challenge, a business plan competition giving California university students the chance to compete for at least $250,000 in seed financing.

A lot of time goes into making these business plans, and if you’re only competing for $5,000, that’s not very compelling. Joshua Raffaelli, Draper Fisher Jurvetson

According to DFJ analyst Joshua Raffaelli, the DFJ Venture Challenge is different from other such competitions because it involves actual venture capital funding—winners will not receive their prize unless they actually follow through on their startup idea and incorporate their company. In addition, the amount greatly surpasses typical cash prizes, which usually range between $5,0000 and $25,000.

Other large-scale business plan competitions that exist today include the Jungle Business Plan Challenge held by Jungle Media Group, publisher of Jungle magazine, and law firm Fenwick & West. This worldwide contest, which is only open to MBA candidates, promises $45,000 in funding. The Start-up@Singapore Business Plan Competition, sponsored by the National University of Singapore Entrepreneurship Centre and France- and Singapore-based business school INSEAD, is another example of a international contest, though it is by invitation only and fetches a $20,000 top prize.

The DFJ Venture Challenge is open to colleges and universities in California that already have a business plan competition; all students, undergraduates and graduates, that qualify for their school’s contest may take part. Raffaelli says these business plan competitions are limited because they only involve that one academic institution, and the cash winnings are often inadequate.

“A lot of time goes into making these business plans, and if you’re only competing for $5,000, that’s not very compelling,” he points out. “If you’re serious about starting that company, you’ll still need to raise a venture round or go get money from your family.”

Raffaelli says in the long run, DFJ wants to encourage budding entrepreneurs at the university level that would otherwise not pursue their startup idea for lack of an incentive. “If you’re a senior in college, and you’re not sure what you’re going to do when you graduate, but you have a great idea in the back of your mind, why not try to go for this competition?”

In addition, by making the challenge an annual event, DFJ hopes to encourage business plan competitions to spring up at universities that don’t already have them—Raffaelli says DFJ is looking to create a “small ecosystem” of young California entrepreneurs with this contest, which perhaps can eventually spread beyond the state.